Wednesday, February 04, 2009

Trickle up economics

On Newstalk they just calculated that if instead of bailing out banks the Irish government gave the money to the people then every Irish citizen over 18 would get €200,000. Is that right? If so it's a shocking amount of money.
The concept is called trickle up economics and the basic idea is that instead of giving money to big business and waiting for the money to trickle down to small business and individuals you give the money directly to individuals. The money makes it into local shops and businesses then into the banking system and finally to big business but it's supposed to be a fairer way to distribute the money.
I can kind of see where they are coming from but surely it would be a nightmare to manage? There would be homes all over Ireland with 40 inch TVs in every room. I must read some more about this idea.


Reggie said...

Hi Dec

I LOVE that idea!

The banks in South Africa don't need a bail-out (yet? - I probably shouldn't say that...), so we aren't t likely to get such a windfall.

But I really hope you do! :-)

We've had to ocntend with other issues, like price-fixing scams by the big producers of essentials such as bread and dairy products. They were fined substantial amounts (though pitifully small in relation to the profits they made), but have not lowered their prices at all. (Does that surprise anyone? Naaah!)

I wonder how trickle up economics would work in such a situation - perhaps the fines could have been paid to consumers of their products, instead of to the government?

Will Knott said...

I would love that - mortgage gone in one stroke.

Maybe an amnesty (or mortgage bailout) for up to this amount would help. The banks still get the money, but the apparent benefit is for those with the loans.

Even with a 500,000 euro mortgage, its a lot off and a re-negotiation position, and with the smaller loans off the books it means that things can get a bit easier.

The reason for mortgage (ok, maybe school/student loans and car loans to get those industries going again) should be included.

Would this help spending ... think about it, a lack of mortgage payments mean either more money for savings or spendings (and it makes any redundancy payment go further).

Does that tweak work better?

Declan said...

@Reggie: we have the same problems with price fixing here. Except no one gets fined. The Irish National Consumer Agency has been investigating high prices in Ireland for 2 years and last night the representative of the NCA was on the radio saying they had yesterday managed to ask some "hard questions". Useless.

@Will Knott: Yup, it would be good if they gave people 200,000 to pay off loans and mortgages. That way the banks would get the money and people would have lower debt repayments and so would have more money to spend. Maybe give money to people with no mortgages as well to fund startup businesses that employ 5 people or more. Unfortunately apparently an Irish government minister was on the radio last night and said it couldnt happen because the government needs to borrow the money they are giving the banks and so will need to repay the money themselves so need the banks to pay the money back.

Nicola said...

Its not E200,000 but when a recession was announced in Spain recently, the government there immediately gave every worker E200 with a further E200 to come over the next year!